Credit is the method of granting a loan to a person on the basis of trust. That person need not reimburse the lender immediately. This term basically refers to system of delayed payments of purchased goods. Goods or money is exchanged against a promise to pay later.
Credit system increases the purchasing power of the person by literally ‘creating’ money. Companies offer credit on the basis of the character and thorough analysis of credit-report of a consumer, stability of his/her residence, occupation. The consumer has to repay his debts back to company in the given time otherwise his credit is cancelled.
This system makes people feel rich and they are able to spend there money with ease. It is an easy way of ‘loan approval’. For example, if a person needs some cash immediately then that person might have to run to bank or some other person for loan but with credit system we can use a credit card for on spot loan.
It offers advantages like business expansion offers, online discounts, low interest rates and many other exciting offers for individuals on their shopping. This system is also beneficial for companies as it has increased their sales volume.
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